A Laurel man with a disabling brain injury and no money told debt collector lawyers that the time limit for seeking payment had expired and that a suit had been dismissed before. But a North Dakota law firm sued him anyway, trying to collect a credit card debt on behalf of the creditor.
This time Timothy McCollough got mad. He hired a lawyer, got the suit dismissed and then sued the North Dakota law firm for violating debt collection laws.
$311,000 in damages A federal jury agreed with McCollough and on Thursday awarded him $311,000 in damages after a three-day trial before U.S. Magistrate Judge Carolyn Ostby.
Billings attorney John Heenan, who represented McCollough, said the verdict sends a message: "Debt collector lawyers need to follow the rules in Montana." McCollough stood up for the thousands of people getting sued by debt collection lawyers and who don't know how to defend themselves, he said. Attorney Fred Simpson of Missoula, representing Johnson, Rodenburg and Lauinger, the debt collector law firm, declined comment.
Unlawful litigation McCollough sued the firm in 2007, alleging that it violated the federal Fair Debt Collection Practices Act and related state law by engaging in abusive, unfair and unlawful debt collection litigation. The firm tried to seize on McCullough's disabilities through the misuse and manipulation of the court system, the complaint said. The firm has about 50 employees in Fargo and Bismarck; it has no lawyers in Montana but has several licensed to practice in the state.
Ostby ruled in November that the firm had violated the federal law by demanding attorney fees not allowed by Montana law; by filing and continuing a lawsuit barred by the statute of limitations in Montana; and by serving on McCollough requests for information that were "an abusive, unfair and unconscionable means to attempt to collect a time-barred debt."
The jury further found that the firm's actions violated the Montana Unfair Trade Practices Act, were malicious prosecution and an abuse of process.
The jury awarded McCollough $250,000 for emotional distress, the statutory maximum of $1,000 for violating the Fair Debt Collection Practices Act and $60,000 in punitive damages.
The punitive award was the maximum allowed under Montana law, which caps damages at 3 percent of a company's net worth, or about $2 million in this case, Heenan said.
Ostby will determine attorney fees to be paid to Heenan. Heenan also said he will seek to have the judge triple the $250,000 damage award as allowed by Montana consumer protection laws.
McCullough's lawsuit stemmed from a credit card debt he owed to Chase Manhattan Bank from the 1990s.
McCullough suffered a head injury in 1990 when he was hit with an iron bar. The injury left him disabled and eventually he began receiving Social Security benefits, which are exempt from collections.
Nevertheless, McCullough testified, he worked with other credit card companies to pay his debts. Chase was the only company that wouldn't work with him, he said.
The debt was sold to a collection company, CACV of Colorado, which sued him in Yellowstone County in 2005. McCullough responded himself, saying the five-year statute of limitations had expired, he had no money and had been harassed by Chase. The case was dismissed.
Two years later, the North Dakota firm, on behalf of CACV, sued McCullough for $9,800, which included about $6,000 in interest and attorney fees.
Getting served a second time angered and frustrated McCollough.
“I was being shoved around," he said. "I don't like bullies. I never have. I got mad. I'm still mad.”
Billings attorney James Patten testified that he reviewed cases in which the North Dakota firm sued. The firm gets default judgments in 90 percent of its cases, which are judgments in its favor when a defendant doesn't respond, he said. Only about 10 percent of the defendants get lawyers or represent themselves.
Johnson, Rodenburg and Lauinger filed about 2,700 lawsuits against Montana residents during an 18-month period ending about mid-2008.
“I think it's a factory," Patten said. "They are mass producing complaints and mass producing default judgments, most of which don't have the documents to back them up.”
The firm maintained that it had done nothing wrong. But Lisa Lauinger, a partner in the firm, testified that the McCullough case has prompted the firm to change its procedures and that it now requires more documentation from clients before filing suit.